The US cotton good-to-excellent rate fell to 44% in mid-July, a full 10 percentage points lower than the same period last year. This figure not only missed the market's expected 46% but also hit the lowest level for this period in five years. For the global cotton textile chain, what does this signal mean? It needs to be examined from three angles: growth stage, historical comparable intervals, and downstream procurement rhythm.
Growth Indicators Diverge: Good-to-Excellent Under Pressure, but Squaring and Bolling Remain Stable
The USDA weekly crop progress report shows that as of the week ending July 12, the US cotton good-to-excellent rate was 44%, down from 46% the previous week and 54% a year ago. The squaring rate reached 60%, slightly above last year's 59% and the five-year average of 59%; the boll-setting rate was 22%, flat with last year and the five-year average.
The decline in the good-to-excellent rate is concentrated in major producing areas like Texas due to hot and dry weather, but squaring and boll-setting progress has not lagged. This means vegetative growth is suppressed, but reproductive growth remains on track. The critical window for yield impact is the peak boll-setting period in August; current data should be seen as an early warning, not a final verdict.
Price Reaction: Zheng Cotton Strengthens Short-Term, but Bullish Amplitude Limited
On July 13, the Zheng Cotton main contract 2609 closed at 16,080 yuan/ton, up 70 yuan/ton from the previous trading day. Spot cotton prices also inched up, but trading volumes did not expand significantly. Historically, every 2 percentage point drop in the US good-to-excellent rate triggers about a 1% short-term rise in Zheng Cotton, and this move fits that elasticity.
However, caution is warranted: squaring and boll-setting rates are within normal ranges, meaning a sharp decline in yield is unlikely for now. The market's "production cut" pricing is more sentiment-driven than fundamentally confirmed. If weather improves or the good-to-excellent rate stabilizes, these gains risk being retraced.
Transmission Effects on Domestic Cotton Procurement Chains
For domestic textile mills, the direct consequence of the US good-to-excellent rate decline is a short-term firming of imported cotton quotes. Factories using US cotton quotas may face rising raw material costs from late July to early August.
Meanwhile, cotton growing conditions in Xinjiang are currently favorable, with no clear tightening on the domestic supply side. The domestic-import cotton price spread may therefore narrow, benefiting mills using domestic cotton. However, if US production cut expectations persist, the medium-term import price floor will rise, compressing the spread and affecting downstream yarn pricing strategies.